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“The Secrets of Overdraft: How Banks are Making Billions on Our Small Dollar Mistakes.”
Using newly published federal data, I show that banks are on pace to generate more than $10 billion in overdraft fees from consumer transaction accounts.
Consumers are unwittingly being ensnared into paying billions in overdraft fees every year, and often the reason is because their banks have designed aggressive products. These results are a product of a system that puts the interests of banks ahead of consumers by methods that are often deceptive.
In case you were wondering where they stood, important leaders from two of the largest companies in prepaid debit cards told an audience at last week's Power of Prepaid that their firms still want to find a way to restore credit to the prepaid card platform. They were similarly in synch in defending overdraft.
When asked why he thinks people like prepaid cards, Dan Henry of NetSpend ("A TSYS Company") redirected the conversation
While news from the Green Dot 2nd quarter earnings elicited praise among investors, the most interesting details concerned Steve Streit's strong statement about overdrafts and the company's new roll-out in check cashing stores.
Steve Street left no room for ambiguity in his comments about overdraft.
I hope no one forgets why the CARD Act was so explicit about rules against check-order sequencing when they hear the big banks complaining about how hard it is to make money on a retail checking account.
For years, banks settled accounts with a technique designed to stimulate more overdrafts.
First, the OCC has clarified that the June 8th guidance from the OCC ("Deposit-Related Consumer Credit Products") is intended only for debit cards attached to a traditional deposit account.
Prepaid is not covered by this guidance. Still, a person at the OCC intimated that a similar guidance is forthcoming for prepaid debit cards.
Banks only have two more weeks to get their existing customers to opt-in for overdraft protection.
I couldn't believe it at first, but its true: banks are spending their time and money trying to understand the psychological makeup of the typical overdraft user. One consultant says that it is all about helping the customer to make a "Good NSF Decision." I will let you guess how they define "good." The hunt is on. Now.
During the NSF-Hunt, a smart banker seeks first to understand. This is what the consultants are for, of course. The rules don't prohibit overdrafts. They just make it a requirement that a consumer gives his or her consent for an overdraft service first.
Still, there's not a lot of time. If in two weeks, the banks have not found a way to get a consumer to opt-in, then that fee stream will be gone.
It is all about the right "relationship."You've heard that term. It is often the come on for a heavy package of wealth management services, or for private banking.
"The relationship banker is the person who is going to fulfill his or her professional mission by putting himself or herself at the disposal of a decision maker. You're not building your career on their back, they're building their industrial purpose on your back." (Fortune Magazine)
That's nice. But there are so many people out there, and so little time before August 15th. Moreover, the consumer that knowingly opts-in for overdraft is not typical.
They're looking for a different type of person. They are seeking to find the co-dependent customer, ideally for a long-term relationship.
To help those bankers with on their NSF hunting, they are seeking help.
The Wall Street Journal has a feature on one of those consultants - David Peterson. Peterson wants the bankers to understand things.
What does a person feel when they get an overdraft? According to Peterson, it is a